Monsanto Co, the world's largest seed company, said on Wednesday it would still pursue an acquisition of Swiss rival Syngenta AG, which has rebuffed talks about its $45 billion offer, even as it warned of market challenges ahead.
Shares in Monsanto fell more than 4 percent to $108 as investors absorbed news the company would likely break even at best in the fourth quarter, and the agrichemical giant said it was cutting costs amid a cautious outlook for 2016 and beyond.
The subdued outlook and lack of progress in Monsanto's pursuit of Syngenta offset news of the company's higher-than-expected profit in the third quarter.
"Expectations are being tempered," said Edward Jones analyst Matt Arnold.
Low commodity prices that translate to reduced plantings of specialty seeds, along with weakening foreign currencies, and pricing pressure on Monsanto's Roundup weedkiller from generic offerings were among the headwinds, said Arnold.
Monsanto said Wednesday that it was working to reduce its operating spending, potentially by $300 million to $500 million by the end of fiscal 2017.
Monsanto Chairman Hugh Grant also emphasized Wednesday that the company still hopes for a friendly deal to acquire Syngenta, but would look at other opportunities if a deal doesn't come together.
"If unsuccessful, this isn't something we're going to turn into an epic struggle," Grant said in a conference call with analysts.
Syngenta has rebuffed Monsanto's overture, saying the offer is undervalued and that there would be a range of antitrust hurdles. But Grant said the offer already provided a substantial premium and that Syngenta was overstating the risks.
Grant said a deal would have to come together in months, not years. He said a combination of the two companies would result in substantial cost savings and revenue growth opportunities.
"There is mounting frustration on both sides of the Atlantic and puzzlement on why they won't sit down," Grant said. "The two companies together are more valuable than the two alone."
Syngenta and Monsanto are among the world's largest agricultural seed and chemical providers. Each has roughly $15 billion in annual revenue.
Grant said if Monsanto acquires Syngenta, it would divest all of the acquisition's seed and trait lines and competing chemistry products to alleviate any antitrust concerns.
"The interest in the sale of the seed assets has been extraordinary, giving us confidence that we can divest the businesses at an attractive price," Grant said.
Monsanto has put its share repurchase program on hold as it pursues Syngenta.
Monsanto said earnings rose to $1.14 billion, or $2.39 a share, in the third quarter ended on May 31 from $858 million, or $1.62 a share, a year earlier. Analysts on average were expecting $2.07 a share, according to Thomson Reuters I/B/E/S.
Monsanto benefited from a $300 million commercial licensing and technology deal that expanded Scotts Miracle-Gro Co's marketing rights to Roundup.
Monsanto officials also said on Wednesday that they were considering an investment of more than $1 billion in a dicamba herbicide production plant in Louisiana.